Can We Ditch Diesel?

Imagine that you buy a car and the salesman offers you all of the gasoline you will ever need – at half price. But you have to pay for it the same day you take delivery of the car. Would you do it? That is essentially the question Rob Lydan, director for solar and wind at Hatch, is asking mining companies today. It is a careful trade-off: How much CAPEX should be invested in renewable energy infrastructure to reduce future operating costs, mostly in the form of diesel, knowing the risks of such an investment?

All of the related costs vary greatly depending on the location of the mine, the diesel generators already in place, the desired proportion of renewables in the total energy mix – known as penetration rate – and the technologies used. Balancing all of these factors is key when determining whether or not to invest in renewable energy.

For isolated mines cut off from the power grid, the investment might make the most sense. Roughly 30 percent of overall operating expenses at these mines are devoted to supplying electricity. In the last decade, the prices of fuels used in the industry have increased fourfold, though an apparent plateau was reached in 2011. The appetite for energy in the mining industry is also expanding. The steady decrease in mineral grades is forcing companies to process more ore in order to maintain production.

All the while, renewable energy technologies – most notably solar and wind power – have become more economical and competitive, whatever the environment. “The cost of wind or solar, from a capital liquidation standpoint, is about half that of equivalent liquid fuel,” Lydan points out. In the Far North, for instance, one liter of diesel costs anywhere between $1.50 and $2.50, which translates to an energy cost of 30 to 45 cents per kilowatt-hour (kW/h), explains Alain Forcione, a research engineer at Hydro-Québec Research Institute (IREQ). “With wind power, you can go down to 20 to 25 cents per kW/h, sometimes 15 to 17 cents even,” he says.

An off-the-grid mine that runs on 100 percent renewable energy may be unrealistic at the moment, but using renewables to offset diesel consumption is not. However, hybrid projects are still very rare. According to a report by consulting firm Navigant Research in October 2013, renewable energy, excluding hydropower, generates less than 0.1 percent of power consumed by the mining industry. “It is a new thing,” says Lydan.